Spain’s Rental Market Is Thriving, Boosted By Buy-To-Let

9 January 2016 – Expansión

Thanks to strong investor appetite / The high profitability of residential investments has increased expectations in the rental market, given that it is the option now chosen by 21% of Spaniards. Experts forecast rental price rises of more than 5%.

The rental market closed 2016 with price rises of 6.7%, but in many large cities, the increases were in the double digits. The difficulties facing young people when it comes to affording a home, the emergence onto the market of hundreds of thousands of homes that were empty and the high returns of real estate investments have increased expectations for this residential option, once forgotten in Spain and which is now the alternative chosen by 21% of Spaniards.

This year, “given that interest rates are not expected to rise in Europe over the medium term, housing will remain attractive as an investment asset”, said Jorge Ripoll, Director of Research at Tinsa. “Speculative demand will push more and more savers towards the sector”, predicts Miguel Cardoso, Chief Economist for Spain at BBVA Research.

In this context, the consensus of the panel of real estate experts consulted by Expansión is that the rental boom will not only continue during 2017, but that the rises may even be larger, especially in the large cities. Julián Cabanillas, CEO at Servihabitat, highlighted that his forecasts indicate an average YoY growth in rental prices “of more than 10%”.

The increase in prices will be “particularly noteworthy in the large cities, whose weight over the national average is also more significant”, added Cabanillas, who warned that: “If prices continue to rise in the double digits, many households will be priced out of the market, particularly those formed by young people”.

The President of Tecnitasa

José María Basañez points out that “during the last few months of 2016, the rental market in Spain was more robust than the market for house sales”, a trend that will continue into 2017, in his opinion. “Therefore, we may well see price rises of more than 5%, on average”. (…).

Other analysts, such as Julio Gil, Chairman of the Foundation of Real Estate Studies, and José García Montalvo, Professor of Economics at the Pompeu Fabra University, think that the rental price rises will be more moderate. Nevertheless, like in the case of house prices, “there will be areas where rental prices will grow more quickly (such as in Madrid, Barcelona, the Canary Islands and the Balearic Islands)”, said Montalvo.

“The rental market is here to stay in Spain. We are seeing a change in mentality, with more and more people convinced that it is the way forward”, says Beatriz Toribio, Director of Research at Fotocasa.

House prices are also rising

Finally, it is worth noting that two new phenomena are being seen in the rental market. On the one hand, rental prices are rising and the volume of house sales are increasing, as Jaime Cabrero, President of the Real Estate Agents’ Association in Madrid, explains. On the other hand, the rise in rentals is making house purchases more expensive, according to Juan Fernández Aceytuno, Director General at Sociedad de Tasación: “The rental market is causing house prices to rise because there are increasingly more investors who are buying properties to rent”. “The high returns offered on buy to let properties are behind the tensions in terms of prices that we have been seeing and will continue to see in 2017”, adds Toribio.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

What’s In Store For The Housing Market In 2017?

28 December 2016 – Cinco Días

“The real estate market can look forward to a new smooth and long expansionary cycle”. That is the consensus of the majority of analysts who have spent the past few days preparing their end of year report and forecasts for next year. Although the forecast figures are unlikely to coincide exactly, the fact is that the trend is unanimous. Provided there are no major macroeconomic changes, in other words, provided employment continues to grow and interest rates continue to remain a minimum levels, all of the experts consulted, be they property developers, construction companies, intermediaries such as the API, notaries, registrars, appraisal companies or bankers, agree that: 2017 will be better than 2016.

This does not mean that there are no clouds on the horizon. For the consultancy firm Knight Frank, the main risk is the political context at home and, to a lesser extent, overseas. “During the months when there was a caretaker Government, many projects were frozen; now the main uncertainty is whether the new Govenrment will manage to approve the budgets”, said Ernesto Tarazona, Managing Partner of Residential and Land at Knight Frank.

In this way, provided there aren’t any new political upheavals, 2017 will be the year in which more homes are sold and constructed and at higher prices. In terms of production, experts calculate that if this year around 70,000 new homes are going to be finished, then next year that figure should increase to around 100,000. Meanwhile, in terms of transaction volumes, next year could be the first year since 2008 when we see more than half a million homes being sold once again, according to Tinsa.

On the other hand, the forecasts vary the most when it comes to house prices, with predicted increases ranging from 2% to 5%. The VI Observatory of the sector, compiled by the Spanish Association of Value Analysis (AEV), together with the Head of the Applied Economics Department at the University of Alicante, Paloma Taltavull, and a group of 21 experts states that the evolution of house prices will be contained due to two essential factors: the stock that still needs to be sold or leased, of which they calculate that 25% is owned by the banks; and the weakness in terms of demand that still persists across the majority of the country. In the opinion of these experts, prices will end this year with nominal increases of around 3.8%, and will continue to rise by around 3% in 2017. Other sources, such as Bankinter, raise that percentage to 5%, due to the booms currently happening in the real estate markets in Madrid and Barcelona, where house prices are rising at double-digit rates given the scarcity of supply of new homes.

What all of the experts seem to have rejected is that the market may generate a new bubble over the medium term, given that: house sales are growing in a sustainable way, in line with new mortgages; and they are doing so in regions with the greatest economic activity and highest levels of job creation. Moreover, the recovery in terms of the promotion of new homes will act as a buffer to prevent one-off price spikes amounting to anything more. (…).

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Notaries: House Sales Rose By 13.3% In Q2

26 October 2016 – El Mundo

The housing market is sticking firmly to its path of recovery. This situation means that house sales, prices and the granting of mortgages are all continuing to rise, according to real estate statistics from the General Council of Notaries corresponding to the second quarter of 2016.

During Q2 2016, house sales rose by 13.3% at the national level (122,776 transactions were recorded), with double digit growth rates recorded in the vast majority of autonomous regions. Reductions in the number of house sales were recorded only in Navarra (-20.4%) and La Rioja (-2.7%).

The Balearic Islands – the main market driver

Six of the autonomous regions that recorded sales growth registered increases below the national average (13.3%), whilst the remaining nine recorded above-average increases. Notable rises were observed in the Balearic Islands and Cataluña, with increases of 27.8% and 25%, respectively.

On the other hand, average prices per square metre at the national level grew by 1.3% during the second quarter of the year, to reach €1,314/m2, and that figure was far surpassed in the Balearic Islands (€2,189), País Vasco (€2,169) and Madrid (€1,883).

Average prices decreased in eight autonomous regions, falling particularly sharply in La Rioja (-34.0%), Navarra (-20.1%) and Castilla y León (-12.3%). Meanwhile, price rose in line with the national average in País Vasco (2.1%) and Murcia (2.5%). Nevertheless, the highest YoY increases in the average price per m2 were recorded in the Canary Islands (7.7%) and Madrid (4.9%).

Regarding the mortgage market, loans signed to acquire homes recorded double digit growth rates overall. The national average increase amounted to 26.1% (with 56,815 operations), with the exception of Navarra, where the number of mortgage operations fell by 0.7%. The autonomous regions with the highest growth rates were the Balearic Islands (48.7%) and Cataluña (45.7%) and the smallest rises were seen in La Rioja (6.7%) and Cantabria (16.8%).

The average mortgage amounted to €130,254

The average mortgage at the national level rose by 3.5% YoY, to €130,254. Despite decreases in Extremadura (-29.1%) and the Canary Islands (-16.1%), significant increases were observed in the average loan amount in Madrid (14.6%) and the Balearic Islands (10.6%).

Finally, the percentage of house purchases financed using mortgages stood at 46.3%. The autonomous region with the highest percentage of financed house purchases was País Vasco (70.4%), whilst the Community of Valencia (31.7%) saw the fewest financed house purchases.

Original story: El Mundo

Translation: Carmel Drake